Portugal’s credit rating downgraded to junk status

A dangerous and novel phase in the eurozone crisis has opened up on Tuesday after the ratings agency Moody’s downgraded Portugal to junk status and voiced strong pessimism about the prospects for its €80bn (£71.8bn) bailout by the EU and International Monetary Fund only two months ago.
The bleak prediction followed Monday’s statement by Standard and Poor’s that the terms for a new bailout being negotiated by the eurozone for Greece would be judged a default, possibly sparking a Greek banking collapse and a European banking crisis.

The statement from Moody’s fuelled a sense of panic over the fate of the euro. The 17 governments of the eurozone, the IMF, the European Central Bank, and Greece’s private creditors are engaged in intense negotiations over the second bailout in little more than a year, expected to amount to up to €120bn.

At the weekend, however, eurozone finance ministers called off an emergency meeting in Brussels for framing the bailout. Instead, they conducted a video-conference on Saturday which agreed to throw Greece a €12bn lifeline next week to cover its immediate funding needs.